Shareholder week brings an effort to oust Wal-Mart Chairman Rob Walton

Wal-Mart is often in the center of a battle between the Wal-Mart insiders and any number of outside groups seeking change from and within the insiders, and shareholder week usually involves public displays of dissatisfaction from hourly workers and labor unions. This year is no different. 

Institutional Shareholder Services, an advisor to big shareholders such as mutual funds, recently issued a scathing report on Wal-Mart’s corporate board of directors, namely chairman Rob Walton, son of founders Helen and Sam Walton. The report also took to task former Wal-Mart Stores CEO Mike Duke.

ISS in a shareholder proposal opposes Walton and Duke’s re-election and criticizes the board for doing little to rectify possible violations of foreign bribery probes. They also believe the directors have failed to address the issue of fair executive pay.

Because Wal-Mart’s U.S. sales have dropped for five consecutive quarters and future guidance is also muted with profit struggles internationally, ISS recommended that shareholders vote “No” on the proposed executive pay plan and consider appointing an independent chairman during the company’s annual shareholder meeting on June 6. 

WAL-MART RESPONSE
Wal-Mart defended its position on executive pay, board selection and efforts to confront the Foreign Corrupt Practices Act violations in a recent filing with the Securities and Exchange Commission. Randy Hargrove, Wal-Mart spokesman, said there was a strong correlation between executive pay and company performance, and that named executive officers were interested in aligning with the interests of shareholders. 

He also said Wal-Mart had spent more than $400 million in cooperating with government prosecutors to look into whether overseas executives had violated the Foreign Corrupt Practices Act, which prevented American companies from offering money or services as a bribe to foreign government authorities.

“We believe that ISS’s analysis misconstrues the nature and operation of Walmart’s executive compensation program,” Wal-Mart noted in the filing.

The retailer said there are a number of misrepresentations about its executive compensation plan which was the basis of the ISS recommendation.

“We believe ISS’s recommendations are incorrect and inconsistent with prior years’ analyses. The primary difference this year appears to be the submission of a letter, dated May 19, from CtW Investment Group which contains a number of misrepresentations and intentionally misconstrues our executive compensation program. CtW is a union-affiliated group that has a long and consistent track record of opposing Walmart, with its sole motive being to undermine the company in an attempt to organize Walmart’s associates,” Wal-Mart noted in the filing.  

Wal-Mart points to ISS’s own quantitative analysis which shows Wal-Mart’s executive pay is of “low concern” with pay aligned with performance and low relative to the median of its peers. The retailer noted that performance-based pay in 2014 reflects lower than expected sales and is fitting with company’s protocol to tie company performance to bonus pay.

In fiscal 2014 Wal-Mart notes its named executive officer earned less in bonuses than in the prior because the company failed to meet financial expectations. Following are top Wal-Mart execs and their 2014 reduction in bonuses, according to Wal-Mart:
• Mike Duke: $1.5 million less,
• Doug McMillon: $520,000 less, 
• Bill Simon: $658,000 less, 
• Charles Holley: $418,000 less,
• Neil Ashe: $226,000 less, and
• Rosalind Brewer: $182,000 less.

FCPA MATTERS 
ISS asked shareholders to oust Walton and Duke from their board seats because they do not feel the company has given enough disclosure into the ongoing FCPA probe.

Wal-Mart said its audit committee and the company are following the appropriate protocol for an independent, thorough investigation. Wal-Mart said it voluntarily disclosed the audit committee’s investigations to the U.S. Department of Justice and the U.S. Securities and Exchange Commission, both of which are conducting their own external investigations.

The retailer said the release of “specific findings” related to the ongoing investigations would be contrary to the company’s best interest as well as its shareholders. Wal-Mart also notes that Walton and Duke have been instrumental in the new compliance programs in all countries where Wal-Mart does business which have resulted from the investigation.

DISGRUNTLED MOMS
Another group taking aim at Walton this week are a faction dubbed real-life “Walmart Moms” who began striking this week in 20 cities with a demonstration in Phoenix held Tuesday (June 3).

“I came to Phoenix to tell Rob Walton what it’s like being a working mom at Walmart. While his family is the richest in the world, my son and I depend on family and public assistance to keep our heads above water. … Women at Walmart need the company to end the retaliation and pay us a minimum of $25,000 a year for full-time work so we can support our families,” Bene’t Homes, a 25-year-old Walmart worker and OUR Walmart member from Chicago, said in the group’s press release.

Wal-Mart has said these groups are backed by union efforts. The retailer continues to emphasize that it promotes more than 180,000 employees each year and three out of four managers within the company started as an hourly worker, including Wal-Mart Stores CEO Doug McMillon.

McMillon, who presides over his first shareholder meeting as the Wal-Mart CEO, recently said Wal-Mart has no problem promoting cashiers into better paying jobs. The problem Wal-Mart faces is when it hires a cashier who remains in that position, for whatever reason, for 15 years. He said store managers make on average $150,000 or more and the majority began their career as an hourly worker. 

Sherry Curtis-Swenson, manager of the Wal-Mart Supercenter in Jane, Mo., told The City Wire last summer that she began her Walmart career as cashier 20 years ago. She oversees 450 employees in a store that is open 24-hours a day. She began as store manager 10 years ago when the supercenter opened. Prior to that she worked in the Bentonville supercenter, the store her husband now manages.

“I can’t imagine doing anything else. I love working with people. Just recently I was able to promote a stocker into an assistant manager position and know firsthand how this will change his life,” Curtis-Swenson said.